Can I pay my mortgage with a credit card?

If you’ve taken out a mortgage, staying on top of your repayments is crucial. Failing to make repayments on time can affect you negatively in several ways. As well as being charged late payment fees, a long overdue mortgage repayment may be reported as a default in your credit history.

While most lenders prefer mortgage repayments to be made from your everyday or linked transaction accounts, the idea of using a credit card might seem like a convenient alternative. However, most lenders are unlikely to allow it, as it typically means exchanging one form of debt for another, often at a higher interest rate.

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Most lenders in Australia do not allow mortgage repayments through credit cards. Using a credit card to pay off a mortgage essentially means replacing one form of debt with another, often at a much higher interest rate.

In Australia, lenders are required to adhere to responsible lending regulations, and they may be cautious about encouraging borrowers to make their mortgage repayments using a credit card, as this could increase the potential debt of borrowers. Additionally, accepting credit card payments might incur merchant fees, which could make credit card payments less appealing for mortgage providers.

Even if your lender allowed it, there are several reasons why you might want to avoid this approach.

Even if your lender allowed it, putting your mortgage repayments onto your credit card would mean being charged interest at a much higher rate. This could potentially put you at higher risk of more money troubles further down the line.

Home loan interest rates may rise or fall when the Reserve Bank of Australia (RBA) adjusts the national cash rate, but they tend to be much lower than credit card interest rates, which are typically unaffected by the RBA cash rate.

For example, at the time of writing, according to the RateCity database, the average variable interest rate for an owner-occupied mortgage with principal and interest repayments was 6.90%, while the average credit card interest rate was 17.24%.

Furthermore, a mortgage payment is unlikely to be considered a “purchase” when using a credit card, which would give you an interest free period (often 45 to 55 days) to clear your balance before interest charges would be applied. It’s more likely to be considered a cash advance, which typically means being charged interest at an even HIGHER rate, with no interest-free period.

Between the higher interest charges and the cost of mortgage repayments, you could find that putting mortgage payments on your credit card could quickly max out your credit limit.

If you find yourself in a situation where you’re unable to make mortgage repayments as per the schedule, consider discussing this with the lender.

You may be able to pause or defer home loan repayments temporarily. This could potentially cost you more money over the longer term, as your interest charges are likely to be capitalised into your loan balance. Still, this may work out cheaper than the interest you might incur if you could pay using your credit card.

Alternatively, check if you can refinance your mortgage at a more affordable interest rate. Compare home loans from other lenders and check the eligibility criteria to see if you may qualify.

You might need to review your household finances. Using your credit card to manage your household expenses could leave you with more of your income available to make mortgage repayments. Some borrowers deposit their income directly into their mortgage offset account to help minimise their interest charges, and manage their other household expenses with their credit card. Of course, you’d also need to repay the credit card debt in full or risk having to pay interest.

Paying your mortgage with a credit card is generally not advised, as the interest rates and third-party fees can quickly outweigh any potential benefits. While most lenders don’t allow credit card payments for home loans, you may be able to use a third-party service, such as a bill-paying app, to make a home loan repayment using your credit card.

Although this might seem like a way to accumulate reward points or better manage your cash flow, the app could charge additional fees on top of the already high credit card interest rates. Additionally, it’s important to check how such payments are treated by your credit provider. Many of these transactions are considered cash advances, which typically come with even higher interest rates and no interest-free days, leaving you with a hefty bill.

If you're struggling to manage your mortgage and are considering using a credit card to make your repayments as a temporary solution, it may be more effective to talk to your lender about renegotiating your interest rate or repayment terms.

It’s also important to reconsider using credit cards when facing financial difficulties. While a credit card can help manage cash flow for some people, it is ultimately just another form of debt that must be repaid. Missing repayments or failing to pay off your balance in full can result in high interest charges and penalties, potentially pushing you into a debt spiral if you’re not careful.

If you need assistance with managing your finances or debt, consider reaching out to the National Debt Helpline for free advice on how to effectively manage your debts.